FTSE busts through 7,000 for first time

The 100:FTSE 100 has surpassed 7,000 points for the first time in its history, less than a month after returning to its 1999 high.

The index burst through the landmark level in afternoon trading on Friday, driven by strong gains in the share prices of large mining companies Fresnillo, Anglo American, Glencore and BHP Billion. Shares in the miners rose between 3 and 4% on Friday as investors continue to capitalise on rock bottom valuations created by the recent slide in the price of commodities.

Gains in the mining sector have been the driving force behind the Footsie's recent landmark gains, with mining and energy companies helping to push the index through its previous all-time closing high of 6,930, achieved in 1999, less than four weeks ago on 24 February.

The index reached new intraday and closing highs on Thursday; however few had predicted it would breach the 7,000 level so soon, particularly as the country heads towards an uncertain general election.

However, Tom Stevenson, investment director at Fidelity Personal Investing sees little cause for celebration: "The FTSE 100 has finally cracked through the 7,000 barrier, but no-one should be celebrating. It's been nearly 17 years since it first broke 6,000 on 1 April 1998 - a long wait for round-number watchers.

"The performance of the FTSE 100 is even more disappointing when you consider that the growth of the UK market has progressively slowed since its launch in 1984. While it took just three years to double the index between 1984 and 1987, it was nearly a decade for it to double again between 1987 and 1996. Even if the market races ahead from 7,000 to 8,000 it will have taken the best part of 20 years for it to double for a third time," says Stevenson.

Jeremy Whitley, head of pan-European equities at Aberdeen, also warned that a subdued trading period may follow the new high: "It's rather appropriate that the FTSE 100 surpasses 7,000 on the same day as the solar eclipse plunged parts of the UK into darkness. The stockmarket has been sunny for investors over the past two years, rallying strongly.

"However, this has been driven not by an increase in earnings but by an inexorable rise in valuations. Consequently we may be in for a period of dull returns until there are visible rays of sunshine in terms of both improved economic conditions and most importantly corporate profit growth," says Whitley.

On where the index may go from here, on Thursday Alistair Strang, technical analyst at Trends & Targets, told Interactive Investor that he expected the index to peak at 7,047 in the shorter term.

"Anything above 6,998.5 suggests an initial level of 7,047 with a secondary rise to 7,101. If it slows down, it needs to fall below 6,860 to break the immediate trend. In theory, weakness below 6,930 allows an initial level of 6,890 and only if that is broken dare we start to suspect some weakness may be present," says Strang.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.